In this blog post of Escaping The Real Estate Newbie Zone, I’m going to be talking about the difference between flipping contracts and flipping homes. I’ll also be talking about in 2016 which strategy you should focus on to profit quick no matter your experience, or if you don’t have much money to invest. Believe it or not, it’s a difference between flipping contracts and flipping houses.
When it comes to flipping houses, that typically means you’re buying the house, fixing it up and then flipping the house to a buyer. For those of you that watch HGTV you’ve probably seen this done before. It’s a lot that goes into flipping houses. You DO need money, or access to capital in order to do this successfully. You need money to buy the house, money to fix up the house, money to pay contractors to fix the house up for you, and then you may have to still wait a few weeks or even months for it to be listed and sold.
Now the profit margins will vary and will depend on a few variables.
#1 Where the property is located? – Is this one of the most desirable areas where buyers are buying right now?
#2 How cheap did you buy the property? – If you bought it cheap, and kept costs low as you could, then that will increase your profits
#3 How are you selling the house? – You’ll need a good realtor to list the property and sell the house for you. You’ll have to pay 6% commission but it’s so worth it.
There are a few others as well that I could mention, but that would take a whole other blog post to cover everything. To keep it short I just mentioned the top 3 variables.
The downside of flipping homes is that it can take 3- 6 months before you get paid, and there are some risks involved. Potentially you could be waiting half a year to get paid a $50k check. Now let’s do some simple math real quick.
If you’re only netting $50k and it takes you 5 months from to start to finish to sell the house. If you break down the numbers you’ve made $10k a month. But you’re not seeing any of that money until the 5th month. I don’t know about you, but I don’t want to wait 5 months to get paid. As a matter of fact, I don’t think anyone can wait that long, because bills are due every month right? Also if you mess up on your numbers, a $50k profit can easily be dropped down to a $35k profit with unexpected things coming up. Example = holding costs, the appraisal not coming back with the same amount you thought, and a list of other things.
So you need to have money stashed away to cover those months you’re not having money come in, and also be very good at money management. Fixing and flipping houses has always been a good business model, and can be very profitable. However, if you’re not good steward of money, and don’t have any other income coming in, you could go broke and be out of business quick.
So now that you know what it all takes to be successful fixing and flipping houses, let’s talk about flipping contracts also known as wholesaling.
This is generally the best strategy to start off when first getting into real estate. Why?
#1 You don’t need a license to do it
#2 You don’t need any prior experience
#3 You don’t need to use any money to buy the house
The biggest difference with this strategy is that you will be tying up the house with a purchase contract and you’ll later be selling that contract to another investor for a quick profit. You don’t have to worry about hiring contractors, fixing the house up, listing it on MLS, or waiting months to get paid. You literally can have a check in your hands within 30 days using this strategy. It’s also a very scalable business model. Once you’re making money, you can go from doing 1-2 deals a month, to 5-8 deals a month. You can also start to flip contracts in other virtual markets, team up with other investors, or even start to get into fixing and flipping.
This is a recession any type of market bulletproof strategy. It works in any market whether the market is good or bad.
In this training I just released, I show you how you can make $3,000 – $10,000 in the next 30 days. This is the what I used to close my first real estate deal back in 2009.
When it comes to flipping contracts, you’re more of a Marketer than a real estate investor. Your mission is to market and find good deals, put those deals under contract, and then flip them to investors to get paid.
Marketing is the lifeline of a contract flippers business.
” If you’re not marketing, you’re not making any money”
So what’s the process and how do you get paid?
#1 Do you market research – find out the hot areas where all the investor activity is happening (buying and selling)
#2 Launch your marketing campaigns to generate leads – This could be Online Ads, Direct Mail, Classified Ads, etc
#3 Sort the leads which ones are hot, mild, and cold – Put the hot ones under contract
Next you’ll be marketing the property to cash buyers – investors, rehabbers, landlords. You’ll mark up the property price a few thousand or if you get the property under contract at a very low price, you can market it up as much as you like. As long as you’re leaving some room for the buyer to make a profit.
You’ll have cash buyers begging to buy the property. You’ll get the buyers to sign a contract with you for the purchase price, and an assignment contract. A title company or licensed title agent will be able to handle the closing for you.
Before you know it you’ll be leaving the title company with a FAT check. The best part about this strategy is that if you weren’t able to find a buyer for the property. You can just back out the contract via an inspection clause. You will need to use a special contract. Which I include in the training here, as well as extensive video trainings on how to get started flipping contracts.
Now that you know the difference between the two. Which one will you be focusing on in 2016?
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